23 May 2014

Global
equity markets were largely positive in the past week as Russia signed a myriad
of deals with China, Europe was focused on elections and civil wars, actual or
evolving bubbled along in the Ukraine, sub-Saharan Africa and Thailand. In a
mood of post-electoral euphoria, as the voters celebrated their wildest dreams
being realized, the Nifty added 164 points, to close 2.3% up at 7367, after
trading in a range of 2.6%. Average daily trading volumes rose sharply again,
to $5.3bn, as FIIs continued their cash equity buying with a net $117mil;
domestic investors continued to be suppliers of stock, selling a net $211mil.
Volatility again traded down, the India VIX falling sharply from 24 to 14
before recovering a bit to close at 18 for net fall of six points on the week.
Breadth was good, with advances three to two ahead of declines but
concentration was again evident in the points’ contributions. Four stocks
representing just 16% of Nifty market cap generated 63% of the upward movement
in the index; two stocks, 9% of market cap, held the index back by 39 points:
24% of the net movement. Index futures closed at a premium of just over 1% to
cash.

We had
just one quarterly result of interest: ITC surprising slightly on the upside
with sales ahead by 11.8% and profits up by 18.2%. The company still faces damp
consumer demand and though cigarette volumes declined, earnings benefitted from
stronger margins, which delivered the surprise. Overall, 35 out of 56 CNX100
companies to have reported so far have delivered earnings above expectations;
the best performing sectors being Financials, IT and Materials.

16 May 2014

Finally
the big week arrived and while other equity markets marked time, India moved
from election mode into the results phase. Market action sustained the strength
of earlier sessions without getting overexcited, as the Nifty added 344 points
on the week, to close 5% ahead at 7244 after trading in a range of 10.2%. The
strongest move came early in the week with the last day of voting on Monday and
the emergence of exit polling results on Tuesday which tended to confirm the
prevailing sense that the Modi-led BJP would win a resounding victory. In the
event, Friday brought confirmation of the Modi “wave” and the market advanced
strongly at first but then met some sustained “selling on the news” when
European markets opened. Average daily trading volumes jumped to almost double
the twelve month trailing average, at $4.6bn as foreign portfolio investors
continued to drive the markets: FIIs bought a net $955mil of cash equity as
domestic sellers sold $277mil. Volatility started out in keeping with the
previous week’s pattern before the India VIX fell back sharply to close at 22,
for a fall of 16 points on the week. Market breadth was strong with advances
ahead of declines by nearly three to one, though the index points’
contributions showed notable concentration. On the upside, seven stocks, representing 33% of Nifty market cap,
contributed 52% of the week’s points’ advance. Closing on a positive note, the index futures
finished at a premium of 1.2% to cash.

9 May 2014

The last fortnight has been
punctuated by public holidays again but a rough summary of market action would
be: developed markets red, emerging markets green. Ukraine is to all intents
and purposes being ignored as a market effect; substantial debate is
concentrated on the policy intent in the two major economic blocs: EU and US.
India meanwhile is getting to the end of its marathon election cycle, with Monday’s
last day of voting to be followed by release of exit polls on Tuesday and
results on Friday. At the moment, SEBI is looking askance at the suggestion of
extending trading hours on Friday to deal with the post-results action. So far
this month, the Nifty has advanced by 76 points, to close 1.1% ahead at 6859,
after trading in a range of 3.4%. In fact, it would have been down overall if
not for a substantial jump of nearly 3% on Friday. Average daily trading
volumes stayed ahead of the trailing average, at $2.7bn as FIIs sustained their
interest, buying a net $270mil from domestic institutions (-$261mil). Market
breadth was flat over the two weeks, with advances equalling declines. The were
some concentrated contributions, however, with the banks especially strong as
ICICI Bank added 42 points to the Nifty movement and HDFC Bank 22. Reliance
Industries was also a good mover, adding 36 points to the Nifty while Infosys
took away 15. Not surprisingly as the climax of the political event approaches,
the India VIX has been trading steadily upwards: opening the month at 31, it
softened slightly at first but climbed steadily to close at 38, having traded a
point higher. Nifty futures closed at a premium of 1.1% to cash as predictions
for a decisive outcome to the election show the benchmark hitting 7000 in short
order.

About Himalayan Fund NV

The Himalayan Fund N.V. is an investment company with its primary objective to generate long-term capital gains for shareholders by investing in India.

This blog shares with you interesting, weekly news about the Indian economy. It provides insights about the financial situation in India and its market. The team of Himalayan Fund offers knowledge about investment opportunities relating to India.

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